(BDB Laws Tax Law For Business appears in the opinion section of BusinessMirror every

second and fourth Thursday of the month. BDB Law is an affiliate of Punongbayan & Araullo (P&A).

Questions on the Tax Amnesty Act

Much has been talked about Republic Act 9480, otherwise known as the Tax Amnesty
Act of 2007, since House Bill 2933 lapsed into a law on May 24, 2005, due to the
inaction of President Arroyo.
Historically, only few legislated tax-amnesty laws were issued, such as Presidential
Decree 23 by President Marcos in 1972 and Executive Order 41 by President Aquino in
1986. This only goes to show that this rare opportunity, or perhaps magnanimity on the
part of the government, is treated with great caution.
Firstly, tax amnesty as fiscal policy is regarded to be indicative of a poor tax
administration and enforcement system. Secondly, it can also be perceived as rewarding
tax evasion/fraud and, in a way, penalizing the compliant taxpayers.
Despite these not-so-popular perceptions regarding tax-amnesty laws, President Arroyo,
in certifying HB 2933 as an urgent bill, had expressed the view that the measure will
instill upon the general citizenry, particularly among the errant taxpayers, the value of
civil responsibility by providing an option for them to make a truthful and faithful
disclosure of their untaxed income or adjust their statement of assets and net worth in
order to become an integral part of the national tax base.
Apparently, the government is very optimistic that the expected benefits arising from the
implementation of RA 9480 will outweigh its demerits. With the law now in effect and
with the recent issuance of the much-awaited Department Order 29-07 by the
Department of Finance implementing the provisions of RA 9480, taxpayers have shifted
their focus on issues affecting the implementation of the law.

Under RA 9480, to enjoy the immunities and privileges under its Section 6, such as
immunity from paying internal revenue tax liabilities for 2005 and prior years, the
taxpayer is required to pay an amnesty tax of 5 percent of his/her net worth (subject to
minimum amounts) as of December 31, 2005.
In addition, the applicant is required to file the following: a) Notice of Availment; b) Tax
Amnesty Return; and c) Statements of Assets, Liabilities and Net worth (SALN) as of
December 31, 2005.
The submission of SALN proves to be controversial because of the different valuation of
the items required to be declared as compared with the balance sheet amounts regularly
prepared by the auditors based on accounting standards. Hence, taxpayers need to
restate their respective balance sheets to conform to the requirements of RA 9480.
As provided in the implementing rules, the assets and liabilities should be valued and
presented in the SALN as follows:

Real properties shall be accompanied by a description of their classification,

exact location and valued at acquisition cost, if acquired by purchase; or the
zonal valuation or fair market value, whichever is higher, if acquired through
inheritance or donation;

Personal properties other than money shall be accompanied by a specific

description of the kind and number of assets or other investments, indicating the
acquisition cost less depreciation or amortization, if acquired by purchase; or the
FMV or value at the time of receipt, if acquired through inheritance or donation;

Assets denominated in foreign currency shall be converted into the

corresponding Philippine currency equivalent, at the rate of exchange prevailing
as of December 31, 2005;

Cash on hand and in bank in peso as of December 31, 2005, as well as cash
on hand and in bank in foreign currency, converted to peso as of December 31,
2005; and

All existing liabilities, which are legitimate and enforceable, secured or

unsecured, whether or not incurred in trade or business, disclosing or indicating
clearly the name and address of the creditor and the amount of the
corresponding liability.

One of the issues that is left unclear by DO 29-07 is on the matter of estate tax. Although
the estate is similarly treated as individuals, will it also follow that the estate tax will be
covered just like in the previous tax amnesties?
In the 1986 tax amnesty, the estate tax is covered if the heirs declared the inherited
properties in their own SALN and pay the amnesty tax on the resulting net worth. Would
the same rule apply?

Equally important to note is the effect of this amnesty law on the target collections of the
BIR. Will the Office of the President somehow reduce the revenue target collections at
least to a reasonable extent? Or will the BIR officials continue to sit at the edge of their
seats trying hard to attain the high collection targets to the detriment of taxpayers?
Questions now loom on whether this Tax Amnesty Act will generate the much-sought
revenue to eliminate our burgeoning budget deficit. Past tax-amnesty programs proved
to be ineffective insofar as addressing this perennial dilemma of the government.
However, if the real objective here is to bring in a large number of errant taxpayers into
the fold of national taxation to broaden and update the tax base, which in effect will
reduce future noncompliance, then the government may be on the right track in
implementing this piece of legislation.